Seeking Alpha – Some analysts say a big-picture trend presently unfolding involves hedge funds and other players unwinding bets on commodities/foreign currencies and plowing the proceeds into U.S. financial and other stocks. They are doing this for valuation reasons and as a haven against weakening economies overseas.

There is some evidence that it at least partly reflects hedge funds scrambling to raise cash to meet redemption requests. Financial stocks have risen for sure, but that likely reflects hedge funds buying back short positions to generate cash, not to go long because they think the fundamentals are turning.

I remain somewhat skeptical of the thesis that the U.S. economy is close to coming out of the downturn, and so the places to shift into are U.S. stocks and the U.S. dollar. When one looks at the problems the U.S. has, especially in its financial sector, they would seem to have the potential to inflict more pain on the economy than we have seen to date.

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Tags: ameriprise, arch-nemesis, bias, downside, extreme-volatility, government-entity, pariah, propp, recession

The Advocate – A Greenwich hedge fund has become ensnared in a legal dispute with one of its investors after refusing to allow the firm to withdraw the $5 million originally invested in the fund.

SageCrest LLC, a Greenwich hedge fund that at one point controlled about $990 million in assets, has been sued by Wood Creek Capital Management, a New Haven-based hedge fund that for more than a year has been seeking to redeem the $5 million it invested in SageCrest.

In a court documents filed in state Superior Court in Stamford last week, Wood Creek officials claimed SageCrest, which is managed by Windmill Management LLC, also of Greenwich, rescinded on agreement to return the $5 million to the New Haven firm, which was requested after the Greenwich firm started posting unsatisfactory returns last year.

In a separate declaratory judgment filed in Delaware courts, the state where SageCrest was organized, the Greenwich hedge fund claimed its original contract with Wood Creek gave them the right to refuse any redemption requests if "the redemption would have an adverse effect" on the fund.

SageCrest "needed to gate the fund," said Bill Brewer, an attorney for the Greenwich fund and a partner at Bickel & Brewer, a law firm with offices in New York and Dallas.

Hedge funds typically throw up their "gates" as a way to preserve liquidity in adverse market conditions.

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Tags: birkenfeld, congress, extreme-volatility, money-managers, mutual-fund, royal-naval-college, sentiment-indicators, upfront